Fitch, Dv01 establish new nonagency RMBS benchmarks

Capital markets fintech Dv01 and research agency Fitch Ratings announced a collaboration to offer new benchmarks for non-QM and jumbo residential mortgage-backed securities. 

Data used to help determine the benchmarks comes from deals the data and analytics provider Dv01 helped facilitate, Fitch-rated RMBS transactions and other issuances where parties agreed to provide information to support their initiative. Benchmarks will be available free of charge on Dv01's web application and aim to provide "the most comprehensive representation," the companies said.

"By breaking through a historically opaque market and offering the benchmarks at no cost, we are making the non-agency RMBS sectors more accessible to both seasoned investors seeking a deeper understanding and new investors entering the space," said Dv01 CEO Perry Rabhar, in a press release, while emphasizing the level of granularity now available from the combined effort. 

Issuers who onboard their securitized portfolios with dv01 — whether or not rated by Fitch — will have deals pooled into a single dataset and be able to benchmark their performance against the broader market. Dv01 clients can also compare individual transactions to those benchmarks.

According to the two firms, benchmark data comprise 75% of each respective loan segment. The non-QM figure includes data from over 210,000 residential originations made since 2013. Original balances of the loans exceed $100 billion.

Meanwhile, the prime jumbo benchmark consists of more than 200,000 loans originated in 2013 or later, with a combined loan balance of $145 billion.

Tools available on the Dv01 platform also give greater insights into risk factors when making assessments, said Kevin Kendra, Fitch Rating's managing director and head of North American RMBS. "The accessibility of the Fitch-dv01 non-agency RMBS benchmarks should offer all market participants a greater understanding of the loan characteristics that drive performance."

Among the findings coming out of the new collaboration about prime jumbo RMBS was a rise in loan-to-value originations between 2018 and 2020, while mortgages with low FICO scores decreased. The past three years have seen LTVs remain stable even as home prices increased faster than household incomes. 

In the non-QM sector, debt-to-income loan performance remained stable over the past few years, even while home prices and interest rates surged.

The latest agreement between Fitch Ratings and Dv01 is the second announced this month to make use of some of the services both offer. Parent company Fitch Group, agreed to purchase a majority stake in Dv01 in 2022, operating it as a separate division but combining resources.  

In mid February, Fitch Ratings rolled out a new interactive RMBS presale report, which gives investors access to loan tapes through an embedded link to Dv01's application. The presale tapes provide greater insights into factors the agency considered in making credit risk determinations.

A recent report looking at overall RMBS performance from Moody's Investors Service found mortgage securities holding up better than other types of consumer debt. But Fitch has also warned of variations between vintages and loan types, pointing out some 2023 segments are performing weaker than earlier pools due in part to their corresponding higher interest rates.